Celsius Network Limited v. Tether Limited, 24-04018

Background

Celsius (CNL, U.K.; CNLLC, U.S.) borrowed USDT/EURT from Tether affiliates under a Token Agreement (TLTD was the contracting Tether entity); the Amended Token Agreement governed large BTC-collateralized borrowings in 2022.
Between April–June 2022 Celsius made repeated BTC transfers to Tether: seven “Top‑Up” transfers (~15,658 BTC avoidable), three borrowings that cross‑collateralized prior debt (~2,228 BTC alleged avoidable), and a June application/liquidation of all pledged collateral (~39,542 BTC).
Plaintiffs allege Tether directed collateral demands to U.S.-based Celsius personnel, executed transfers from U.S. accounts/servers, and used U.S. intermediaries, and that Tether sold or retained Celsius BTC below market and for its own accounts.
Plaintiffs sued under Bankruptcy Code avoidance/recovery provisions (11 U.S.C. §§ 547, 548, 544, 550) and BVI contract claims (breach of contract and implied covenant of good faith) against four Tether entities (TLTD, THL, TIL, TOL).
Defendants moved to dismiss for lack of personal jurisdiction, extraterritoriality, failure to state claims, and lack of standing for CNLLC; the Court granted in part and denied in part: it found personal jurisdiction, declined to resolve CNLLC standing now, dismissed the BVI good‑faith claim (Count IV) without prejudice, and otherwise denied dismissal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Personal jurisdiction over Tether entities	Tether purposefully availed itself of the U.S. by using Celsius to "exploit" U.S. markets, negotiating/performing with U.S.-based personnel, and directing transfers/demands to U.S. persons/accounts.	Agreements were with a U.K. nominal counterparty, negotiations/performances occurred abroad, and the transfers were foreign; no consent to U.S. jurisdiction.	Court found plaintiffs made a prima facie showing of specific personal jurisdiction based on purposeful availment and related contacts; reasonableness not shown to defeat jurisdiction.
CNLLC's standing to sue under Token Agreement	CNLLC and CNL operated as a single U.S.-based enterprise (common executives/substantive consolidation) so CNLLC may assert rights.	CNLLC is not a party to the Token Agreement; no assignment; substantive consolidation/alter‑ego issues under BVI law unresolved.	Court declined to decide standing now; reserved for further briefing/discovery; issue not resolved on motion.
Breach of contract (Count III) — 10‑hour waiting / liquidation	Tether breached the Amended Token Agreement by liquidating prior to the 10‑hour margin period; Mashinsky’s alleged oral authorization did not satisfy the contract’s written‑modification clause.	Agreement expressly allowed TLTD to liquidate when collateral crossed triggers; insolvency clauses independently authorized liquidation; oral permission and insolvency defenses.	Court denied dismissal of Count III: complaint plausibly alleges breach and that oral waiver was insufficient; factual questions (including estoppel and knowledge of insolvency) preclude dismissal.
Implied covenant of good faith (Count IV) under BVI law	Tether arbitrarily and dishonestly exercised its discretion in liquidating/retaining collateral, breaching an implied duty.	BVI law does not recognize a general duty of good faith in commercial contracts; only limited duties (e.g., Braganza duty, duty of an equitable mortgagee).	Court dismissed Count IV without prejudice (plaintiffs failed to plead a BVI‑recognized general duty); leave to amend granted.
Avoidance and recovery claims (Counts I, II, V, VI) — extraterritoriality, preferences, contemporaneous exchange	Transfers were domestic because they were initiated/approved by U.S. persons, used U.S. accounts/servers/intermediaries, and depleted U.S.-controlled estate property; Bankruptcy Code avoidance provisions apply. Preference elements (including that transfers improved Tether’s position as of petition date) are sufficiently pleaded.	Transfers were foreign (between foreign entities under a foreign‑law contract); avoidance provisions should not apply extraterritorially; TLTD was fully secured at transfer dates; cross‑collateral/postings were for new value, not antecedent debt; application was contemporaneous exchange/new value.	Court denied dismissal of avoidance/recovery claims: plaintiffs plausibly alleged the transfers were domestic and pleaded preference/fraudulent‑transfer theories sufficiently at this stage; issues (over‑/under‑secured status, contemporaneous exchange, narrowing of claims) reserved for later proceedings.

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: court must accept well‑pleaded factual allegations as true and determine plausibility)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible, not merely speculative)
Ford Motor Co. v. Montana Eighth Judicial Dist. Ct., 592 U.S. 351 (2021) (specific jurisdiction where suit "arises out of or relates to" defendant’s forum contacts; focus on affiliation between forum and controversy)
Walden v. Fiore, 571 U.S. 277 (2014) (a defendant’s contacts with forum, not plaintiff’s, determine jurisdiction)
RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325 (2016) (presumption against extraterritoriality; statutory focus inquiry)
Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247 (2010) (statute applies domestically absent clear congressional intent otherwise)
Picard v. Fairfield Sentry Ltd. (In re Picard), 917 F.3d 85 (2d Cir. 2019) (Bankruptcy Code avoidance provisions: focus on the initial transfer that depletes the estate)
Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120 (2d Cir. 2002) (reasonableness factors in jurisdictional due‑process analysis)
Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81 (2d Cir. 2013) (procedural leeway on jurisdictional motions; courts may consider affidavits, permit discovery, or hold hearings)
Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161 (2d Cir. 2013) (purposeful availment and market exploitation as bases for specific jurisdiction)
U.S. Bank Nat’l Ass'n v. Bank of Am. N.A., 916 F.3d 143 (2d Cir. 2019) (tests for specific jurisdiction in contract disputes and consideration of prior negotiations, contemplated future consequences, contract terms, and course of dealing)